Class 53
Why the cryptocurrency market falls fast and rises slowly
When the cryptocurrency market falls, many people feel like everything is collapsing in a few days. But when the market rises, it usually goes up slowly over months. This is not a coincidence; this is how financial markets work.
First, due to fear.
When the price starts to drop, many people sell out of fear of losing more money. This selling causes the price to drop further, generating more fear, and more selling. A chain effect is formed.
Second, due to leverage.
In cryptocurrencies, many people trade with leverage. When the price drops, positions are automatically liquidated, resulting in forced selling and causing the price to fall even faster.
Third, due to macroeconomic news.
News about interest rates, inflation, war, regulation, or the global economy can cause investors to sell risk assets.
That’s why assets like Bitcoin tend to fall sharply when there is uncertainty in financial markets.
Something important you should understand
Financial markets move by emotions:
Emotion-Market
Optimism-Slow rise
Euphoria-Fast rise
Doubt-Sideways market
Fear-Drop
Panic-Sharp fall
Desperation-Floor
Hope-Begins to rise
This is known as the psychological cycle of the market. It took me time to understand this in my learning process.
Something that many traders learn over time
The market normally:
Rises slowly,
Drops fast
Scares most
Rewards the patient
That’s why many people buy when everything is rising and sell when everything is falling, exactly the opposite of what experienced investors do.
Bear markets not only serve to lose money if you don’t know what you’re doing.
They also serve to learn, study, understand the market, and prepare for the next cycle.
Because markets are cyclical:
Bull market
Sideways market
Bear market
Accumulation
New bull market
And the cycle starts again.
$BTC #mercado #bitcoin